In late May, the Business Council of New York issued a news release stating its opposition to the Dunkirk repowering project. Following that release, the Council promised to send the OBSERVER a follow-up article to explain its position, which was published on June 30. That opinion piece warrants a response.
The Business Council asserts that it doesn't oppose NRG investing in and repowering Dunkirk as long as ratepayers don't take on part of the financing risk. That is disingenuous - and entirely misses the point. National Grid itself identified a reliability need for the power system in Western New York and the New York Public Service Commission (PSC) recognized that local generation through a repowered Dunkirk plant is one way to meet that need, as would transmission upgrades. The PSC asked for proposals from both parties to meet the need, taking into account ratepayer costs, jobs and associated economic benefits. But either reliability solution - NRG's repowering or National Grid's transmission-will be funded by ratepayers. The real question is: how does the ratepayer get the biggest bang for its proverbial buck?
As a company that does not have a regulated rate base of customers, NRG already takes market risks at its multiple power plants across New York. In fact, NRG is mothballing its units at Dunkirk because they are currently uneconomic. NRG's Dunkirk bid provides the PSC with a price to preserve reliability at Dunkirk through a repowered facility just as the PSC requested. The PSC can compare this cost and the associated short- and long-term benefits of the repowered plant to the costs and risks of National Grid's transmission proposal. As for the cost of electrical energy, keep in mind that National Grid doesn't generate electricity; its transmission and distribution lines only move it from generators to consumers. Ratepayers will naturally still pay for electricity, whether it's generated at Dunkirk, or somewhere else.
The Business Council also states in its op-ed that it opposed "this specific proposal" (the Dunkirk repowering) because "it runs counter to New York's now dynamic and competitive energy market where capital costs and associated risk are borne by the developer."
The NRG proposal is a response to a reliability need identified by National Grid and the PSC. The costs and benefits of NRG's reliability proposal will be weighed against the costs and benefits of National Grid's proposal. Currently, New York does not have an existing market mechanism to address this type of reliability need other than through this RFP process. So, how can asking the transmission owner (National Grid) to compete against another potential reliability solution "run counter to the competitive energy market"? NRG is the largest independent power producer in the nation, and as such, is a proponent of well-functioning markets such as those in New York.
Knowing that ratepayers will fully fund the reliability solution in either case, the relevant question here is: which option is best? If the Dunkirk repowering option is chosen, NRG will sign a contract that requires it to meet its performance obligations at a price that it must agree to upfront - and which will not change. If National Grid is chosen, it will receive a regulated return on investment through a rate case with the PSC, and as is customary with regulated utilities, it may ask for overruns in future rate cases. Ultimately, the PSC must choose which option is the best option for New York ratepayers and consumers.
The PSC wisely chose to run this request for proposals, asking NRG and National Grid to compete to provide the reliability solution that can provide many local and statewide ratepayer and economic benefits.
The Business Council should allow the process to work and should advocate for the best outcome for New York consumers, not the best outcome to a small group of its members. Needless to say, without a repowered Dunkirk, ratepayers will still pay for electricity, but it will be produced elsewhere, and the economic benefits will also go elsewhere - whether in New York or outside the state.
If Dunkirk is the better reliability solution, how can exporting its multiple benefits be the best solution for New York's consumers, ratepayers and taxpayers?
Lee Davis is president of the East Region of NRG Energy Inc.